There’s no right or wrong reason to sell your business; when you’re ready, you’re ready.
In my years as a business owner, CFO and advisor, I’ve seen all sides of the equation, and a number of different reasons for exiting. Some owners are just tired, many are bored and some just want a new opportunity. The reasons for exit are as personal and varied as business owners themselves.
That said, here are the most prevalent signs to recognize. If you find yourself identifying with these, it may be time to think through a potential or near-future exit, seek professional advice and set yourself up for the best outcome.
1. The passion is gone.
In many cases, people just get tired. They no longer get excited about running the business like they used to, so they start looking to exit and pursue something else. Or maybe you have a gut feeling that it’s time for a change. Perhaps you’re feeling stuck in your current situation, finding yourself brainstorming interests—whether hobbies, philanthropic endeavors or even a new business venture—to pursue.
2. You feel like you’ve peaked.
Does it seem like your business has outgrown you? Maybe you feel there are opportunities for growth within the industry, but you don’t have the resources or means to take advantage of those opportunities. If that’s the case, a good option might be to exit to a larger company or group of individual buyers. That group can then take hold of those growth opportunities, continuing the success your business has enjoyed over the years.
3. Your net worth is tied up in your business.
Maybe you’ve established a good business but feel too much of your net worth is tied up in it. At some point, owners reach a time in their lives when they believe it would be beneficial to convert some or all of their equity in the business to more liquid assets.
4. You feel conflicted about major company decisions.
As some business owners near the end of their careers, they become more risk averse and start making decisions that could become detrimental to the company and its overall value. For example, maybe you recognize that you need to invest in new equipment, technology or manpower to stay competitive—but you don’t want to do so if it means keeping more money tied up in your business. In that case, it may be time to turn over the company to someone who is willing to re-invest in the business and its future.
5. Your market is in decline.
When your industry’s market has peaked or even begun to decline, your income stream can take a quick nose dive. That’s a clear signal that it might be a good time to get out, rather than face the negative consequences.
6. Death, disability, divorce, distress or disagreement.
In the exit planning industry, we call these the five “Ds”. They tend to be the case about 50% of the time. Ideally, you already have a contingency plan in place before one of these involuntary, unforeseen instances occurs. If not, it could result in you having to sell your business at well below fair market value—or even a complete loss and ultimate bankruptcy of the company.
While there’s no absolute indicator of exit readiness, these can all be strong signs that your time has come. Once you decide to consider a near-term transition, it can be relieving and empowering—but also overwhelming. To avoid bad decisions you may regret in the future, it’s important you pull in the right professionals and consider key questions to drive your exit strategy. Regardless of the reason for your exit, planning is the key to a successful outcome for you, your family and your business.